Correlation Between Five Below and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Five Below and Summit Materials at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Five Below and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Below and Summit Materials, you can compare the effects of market volatilities on Five Below and Summit Materials and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Five Below with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Below and Summit Materials.
Diversification Opportunities for Five Below and Summit Materials
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Five and Summit is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Five Below and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Five Below is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Five Below are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Five Below i.e., Five Below and Summit Materials go up and down completely randomly.
Pair Corralation between Five Below and Summit Materials
Given the investment horizon of 90 days Five Below is expected to generate 2.68 times less return on investment than Summit Materials. In addition to that, Five Below is 1.19 times more volatile than Summit Materials. It trades about 0.01 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.05 per unit of volatility. If you would invest 2,675 in Summit Materials on January 26, 2024 and sell it today you would earn a total of 1,218 from holding Summit Materials or generate 45.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Below vs. Summit Materials
Performance |
| Timeline |
| Five Below |
| Summit Materials |
Five Below and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Below and Summit Materials
The main advantage of trading using opposite Five Below and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Below position performs unexpectedly, Summit Materials can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Summit Materials will offset losses from the drop in Summit Materials' long position.The idea behind Five Below and Summit Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Summit Materials vs. Eagle Materials | Summit Materials vs. CRH PLC ADR | Summit Materials vs. Cemex SAB de | Summit Materials vs. James Hardie Industries |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| AI Investment Finder Use AI to screen and filter profitable investment opportunities | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |